Note on the long withdrawal period: In the absence of information, it can be up to 1 year and 14 days!

Continued education and understanding of consumer protection is essential. In particular, the ruling of the European Court of Justice (ECJ) of May 17, 2023, has highlighted the explosive nature of the correct information on the right of withdrawal in contracts (Ref.: C-97/22).

In my two previous blogposts here and here, I reported in detail about this ruling and explained the basic aspects.

The “old” but important aspect: The withdrawal period of 1 year and 14 days.

Since the publication of my previous articles on this topic, I have received numerous queries and have had discussions with various peers. One thing has become clear to me: Many service providers and craftsmen are not aware of the implications of this issue. A significant number of you do not have proper contract texts and thus do not correctly revoke consumers’ right of withdrawal.

The long withdrawal period of 1 year and 14 days, which comes into effect if the consumer has not been correctly informed of his right of withdrawal, poses a massive risk. This deadline is not new in German law and has always existed. However, the recent ECJ ruling has brought the explosive nature of this deadline to the fore and its application suddenly has far-reaching consequences.

In fact, many of you may already be in the danger zone, as contracts dating back about a year could potentially be affected by this ruling. If the consumer was not properly informed of his right of withdrawal at the time, he can theoretically still withdraw from the contract today. The financial impact could be significant, as according to the ECJ ruling, no value replacement is owed, even if the work has already been fully performed and significant material costs have been incurred.

I am aware that various legal colleagues are already preparing a large number of proceedings based on this judgment. The wave of litigation may be upon us. This underscores the urgency and need to review and adjust your contracts. Don’t let this situation catch you off guard.

The revolutionary novelty: No value replacement in case of revocation

What is extraordinary about this ECJ ruling, and what makes it so significant, is the decision that no value replacement is owed by the consumer, even if the withdrawal occurs after the work has been completed and after significant material costs have been incurred by the service provider.

This finding has the potential to fundamentally change the rules of the game. In the past, service providers and craftsmen could at least hope to be reimbursed for the cost of materials if a customer canceled his contract. Now this ruling makes it clear: even this hope is no longer justified. And this applies regardless of how extensive the work was or how high the material costs turned out to be.

The consequence? Companies could be stuck with the entire cost, even after they have fully performed their services. This is a serious change in consumer law that poses significant financial risks for service providers, craftsmen and freelancers.

This decision should set alarm bells ringing for anyone offering their services to consumers. It is an urgent reminder to scrutinize and adjust your own contracts and business practices. In light of this new legal situation, it is of utmost importance that anyone offering their services to consumers is fully aware of their rights and obligations.

Risk prevention and strategy adaptation: the urgent need to adapt your contracts

In view of these profound effects and the possible massive financial consequences, I urgently appeal to you: check your contracts for correct revocation instructions. This may be a challenging task, but the lack of such instruction can result in serious and avoidable financial consequences.

It is not only important, but urgent that you act now. Not only do your existing contracts need to be adjusted, but your business practices could use an overhaul as well. One strategy, for example, could be to no longer sign contracts with end users directly at the customer’s home, but to invite them to your office or facility for a signing. This would mean that the right of withdrawal would not come into effect and the risks resulting from the ECJ ruling could be avoided.

At the same time, I recommend you think about other strategies to protect your business. The legal landscape has changed, and it’s important that you adapt and be prepared.

Stay tuned for more articles and resources in the coming days and weeks that will help you meet these legal requirements and protect your business. It is critical that you and your company are armed against potential legal risks. As always, I am available to answer your questions and guide you in this complex area.